Deck 4: Constitution of Trusts

Question 1

Which of the following statements most accurately describes the ways in which a settlor (owner of property) may seek to create a trust?

A) Either by transfer of the property to be settled on trust to a third party to act as trustee, or by the settlor declaring him- or herself trustee.
B) Transfer to a single third party to act as trustee, or to a group of persons to act as trustees.
C) Either by declaring himself trustee for the beneficiary or beneficiaries, or declaring himself one of a body of collective trustees.
D) Either by setting out his wishes orally, or in writing.

Answer 1

A

Question 2

Which of the following statement best describes what is meant by 'constitution' of a trust?

A) The trust is properly created.
B) It refers to the different property and beneficial entitlements that make up the trust.
C) It simply describes the situation which allows the beneficiaries a right of action to enforce their beneficial entitlements under the trust.
D) Title is properly vested in the trustees, so that the settlor is no longer entitled to the property as owner.

Answer 2

D

Question 3

In 2013, Reginald moved into a flat with his partner, Peter. Following a few months of living together happily, Reginald took the land certificate to the flat and wrote on it 'All this now belongs to Peter'. Reginald has now died and in his will he left the flat to his ex-boyfriend, Marshall. Peter is:

A) Entitled to the flat, as Reginald did all he could do to effect the transfer of the title to Peter.
B) Entitled to the flat, as it would be unconscionable for Reginald's estate to deny the clear intention that Peter should have the flat.
C) Not entitled to the flat, as the provision in the will for Marshall demonstrates that Reginald did not intend to make a gift of the flat to Peter.
D) Not entitled to the flat, as Reginald has used an ineffective method to transfer the flat to Peter, and it passes to Marshall under Reginald's will.

Answer 3

D

Question 4

Three months ago, Bill agreed with Nixon to transfer his shares in Watergate Ltd to Nixon, to be held on trust for the benefit of his nephew, George. Bill asked his secretary, Monika, to ensure that the shares were transferred to Nixon and the transfer registered, but this was never done. Bill is now in severe financial difficulties and wishes to recover and sell the shares in Watergate Ltd to be able to pay off his creditors. Bill may:

A) Recover the shares, as there was no valid transfer of the legal title in the shares to Nixon (the would-be trustee).
B) Not be able to recover the shares, as he clearly intended that George should benefit, and equity will give effect to that intention.
C) Not be able to recover the shares, as Bill had done all he could do as settlor to transfer the shares effectively, and the outstanding act is that of a third party.
D) Recover the shares, as this was an inter vivos transaction that has not been completed.

Question 5

Who is a 'volunteer' in equity?

A) A person who has not provided valuable consideration for the promise to create a trust.
B) A person who gratuitously agrees to act as a trustee.
C) Any beneficiary of a trust.
D) A person who has made a subjective decision to enter into a trust with another, without coercion.

Question 6

Which of the following is not recognised as valuable consideration in equity for the creation of a trust?

A) Settlement made by the settlor in contemplation of his daughter's marriage.
B) Payment of £10,000 to the settlor.
C) The fact that an agreement was made in a deed.
D) Transfer of a valuable painting to the settlor.

Question 7

Which of the following statements is not true in relation to volunteers?

A) It is irrelevant that the beneficiary was a volunteer, if the trust has been completely constituted.
B) A volunteer may not compel a would-be trustee to sue on his or her behalf to enforce the promise to create a trust.
C) A volunteer may never enforce an incompletely constituted trust.
D) A volunteer who is party to a covenant to settle property on trust will get no assistance from equity, but may have rights in common law.

Question 8

Vincent was a wealthy widower who owned some very valuable paintings. Four years ago, Vincent promised to give an original Picasso painting to Bela, his butler, in return for many years of service. However, three months ago, Vincent dismissed Bela from his service, following a major disagreement and vowed never to have contact with Bela again. Vincent died yesterday from a heart attack. Bela remains executor of Vincent's will. Bela:

A) Is not entitled to the Picasso painting, as Vincent did not complete an inter vivos gift to Bela.
B) May be entitled to the Picasso painting, as he entered into an agreement with Bela, which Bela can now enforce as executor of the will.
C) Is not entitled to the Picasso painting, as Vincent clearly changed his wishes following the major disagreement with Bela.
D) May be entitled to the Picasso painting, as the gift is completed by Bela getting legal title to the property as executor.

Question 9

Alma was diagnosed with throat cancer. She said to her lover, William 'It is my dying wish, William, that you should have my Malvern penthouse apartment.' Alma then handed a box to William to be opened on her death. Alma has now died from pneumonia, and the box contains keys to the apartment. William:

A) May be entitled to the property, as there may have been a gift made on account of death.
B) Is not entitled to the property, as land is required to be transferred by deed to be effective under s.52(1)(b) Law of Property Act 1925.
C) May have been be entitled to the property under a gift made on account of death, but Alma has died from pneumonia, not cancer.
D) May not be entitled to the property, as Alma did not appear to leave a will relating to her property, and William is not her next of kin.

Question 10

Which of the following situations is a situation in which the potential beneficiary may be entitled to common law remedy for failure to constitute a trust?

A) The settlor expressly covenanted with the beneficiary by deed to settle the property on them.
B) The beneficiary, due to the Contract (Rights of Third Parties) Act 1999, can have damages paid for any failure to constitute the trust, however that promise was expressed.
C) The beneficiary can require the trustee to bring an action on the beneficiary's behalf for failure to complete the trust obligation.
D) There are no situations in which common law can give damages for failure to constitute a trust.